China June PMI seen dropping to four-month low – Reuters poll

BEIJING (Reuters) – Growth in China’s manufacturing sector likely stalled in June, a Reuters poll showed, adding to expectations that Beijing will have to roll out more stimulus to boost the sluggish economy.

The official manufacturing Purchasing Managers’ Index(PMI) is expected to have slipped to a four-month low of 50.0 in June from 50.1 in May, according to the medium forecast of 32 analysts polled by Reuters.

That would fall right on the 50.0 mark that separates expansion in activity from contraction on a monthly basis.

China’s manufacturing activity had expanded for three consecutive months from March to May, after seven months of prolonged contraction, fuelling hopes that government attempts to stimulate the economy were gaining traction.

More recent data, however, has shown that growth remains fragile, and the tepid forecast for June’s activity reflects worries that momentum in the world’s second-largest economy has continued to slow.

“Fixed income, investment, trade and output data all pointed to the fact that growth in the economy has slightly eased,” Zhou Jingtong, a researcher with Bank of China said, adding that a drop in commodities would drag on the PMI reading in June.

Uncertainties about the global economy have also spiked after Britain voted last week to leave the European Union. While it is not expected to have an immediate impact on China, prolonged uncertainty could dent business confidence and hurt demand in Western Europe, one of China’s biggest markets.

Premier Li Keqiang on Monday reassured investors that China will be able to maintain stable economic growth this year and in the long term. He said short-term volatility in the economy is hard to avoid, but China has enough room to use policy tools to help support the economy.

The official manufacturing PMI data will be released on July 1, along with the official services PMI. China’s statistic bureau will release second-quarter gross domestic product figures on July 15.

The Markit/Caixin PMI, a private gauge of manufacturing activity, also is due on July 1. Analysts expect it to dip to 49.1 from 49.2 in May, suggesting activity at China’s factories shrank for a 16th straight month.